Hi Jim.
Half full, half empty. The former manifests through the external influences of the 'technology', the latter shows up in some of the ways it is used. I have remained cognizant, as you know, and first discussed this subject at length twenty-some-odd years ago (major stock market crashes will have that effect on you), about the then potential anomalous outcomes from program trading going as far back as 1987.
It's easy to envisage the same types of shenanigans in the energy markets (a la Enron) coming out of emerging smart grid applications that go haywire when stressed at the intersection of bulk energy spot swaps and legitimate grid monitoring data used for load shedding and self-healing purposes resulting potentially in local power outages, or worse, comparable to the flash crashes of which you inform. Cloud computing, likewise, could be used for nefarious-seeming and almost predatory-appearing purposes compared to how our culture has always regarded doing business as usual, i.e., on a level playing field.
Since my focus has been elsewhere, the trading aspect, as influenced by low-latency improvements, has always remained a secondary, or more distant, consideration to me. However, due to the impetus to slice microseconds ever finer in the financial markets a ton of capital has gone into research and development of a capability that is now proving crucial to 21st Century cloud computing -- and an array of other state-of-the-art architectures, even if the connections between those emerging fields and the trading domain remain unknown or only vague to those using it for other purposes.
All of that said, I see algorithmic trading today as something that has become an activity that should be separate from investing (in the true sense of that word), and even traditional forms of day trading activities, and more akin to gaming that is consistent with a 'real' casino industry structure (as opposed to merely the metaphorical use of the term when referring to the markets) that should be set up as a legitimate gaming domain outside the scope of the stock markets, were it only possible to do so without impacting the valuations of real companies, which I'm afraid, today at least, is not possible.
FAC
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